It is bitter cold in New York this morning, 2 degrees, plus the wind chill. Across the border into Canada, it’s minus 14 – a little warmer. How is it possible that minus 14 is warmer than 2 degrees? Obviously, the Canadians use a different thermometer.
You cannot make yourself warmer by switching thermometers, and the government cannot make you richer by printing more money – or by mandating a raise in the minimum wage. Jeremiah believes that everything, including your labor, has a “real” price. The government can raise your “nominal” wage with the stroke of a pen, but it will take concerted effort to raise your real wage.
Let’s say that you have to work all day at the grocery store in order to buy a bag of groceries. Maybe that’s a six hour shift at nine dollars and you keep $40 after taxes. You could be paid in pesos, and it wouldn’t make any difference. Your day’s labor is worth one bag of groceries.
Now, along comes the government and hikes your wage to $15. Cool, huh? You will feel richer for about six months, while the dollar depreciates. You see, everyone else got a wage hike, too. So, the price of McDonalds went up, and the price of gas went up, and groceries went up.
You still have to work all day to buy a bag of groceries. Your nominal wage went up, but your real wage is unchanged.
Raising your real wage will take real work. It takes a growing economy, and a tight labor market. You may have to join a union, or find a new job, or go back to school. Government can help, with the right policies, but there is no magic.
If you believe that the government can change the real wage structure by fiat, then you believe in magic. As Thomas Sowell said, if you can’t handle the truth, you’ll keep voting for liars.
See also: Socialist Brain Drain